Oversight and supervision


  • NZX properly fulfils its regulatory role in the market
  • The Commission is ready to fulfil new statutory roles including under the Financial Advisers legislation


  • NZX responds constructively to all recommendations in the Commission's annual review of NZX's performance of its regulatory role
  • The Commission has, within the funding available, put in place the people, training, procedures and infrastructure to implement new financial adviser law when it comes into force


The Commission was satisfied NZX had responded constructively to matters raised in the oversight review of the 2007 calendar year. NZX had made improvements in the availability of listed issuer information on its website and completed the revision of the New Zealand Markets Disciplinary Tribunal Rules.

This was reported in the Commission's fourth annual oversight review of NZX's performance of its regulatory functions as a registered exchange, published in December and available on the Commission's website.

Financial advisers regulation

The Commission remains on track for full implementation of the new regime regulating financial advisers. Under the Financial Advisers Act 2008, the Commission is responsible for regulating the financial adviser industry. Over the past 12 months, we have been mobilising the financial sector to set up the new financial adviser regime.

The regime aims to promote the professionalism of all financial advisers, requiring them to meet general conduct and disclosure standards. In addition, advisers who provide personalised advice to retail clients must comply with licensing requirements and demonstrate they meet minimum standards of conduct and competence. Streamlined licensing arrangements are available for adviser businesses that can satisfy the Commission they have the capacity to take responsibility for their advisers' conduct and meet the level of consumer protection required by law.

Oversight of this work has been undertaken by the Commissioner for Financial Advisers. David Mayhew replaced Annabel Cotton in this role in January 2010.

In April, the Minister extended the timetable for implementing the Financial Advisers Act, announcing that the new regime will come fully into force on 1 July 2011. This gives advisers a further seven months to complete any training and education needed to meet the competence standard required for authorisation.

Significant aspects of the work undertaken are outlined below.

Industry consultation

The Commission has supported the work of the independent financial advisers Code Committee, which drafted a Code of Professional Conduct for authorised financial advisers. The Code has been released to the industry for comment and will be presented to the Commissioner for approval later in 2010. The Commission has also consulted extensively with industry bodies and participants on implementation issues.


We have worked with The Skills Organisation, the training organisation for the financial services industry, which is establishing a qualification regime. The Skills Organisation is, in turn, working with numerous public and private education providers to establish training courses for advisers preparing for authorisation.

Public register

We have been working with the Companies Office to facilitate setting up a public register of all financial service providers. The public will be able to access this to check if an adviser or organisation is registered or authorised.

Guides for industry

The Commission published two guides for the financial adviser industry to assist with transition to the new regime. These explained how to prepare an Adviser Business Statement (ABS), which is a key requirement for being licensed by the Commission. The first guide targeted businesses applying for qualifying financial entity (QFE) status; the second targeted individuals applying to become an authorised financial adviser (AFA). These documents were made freely available on the Commission's website.

Communication with industry

Communication with the financial adviser industry has been a priority as we facilitate the set-up phase of the new financial adviser profession via face-to-face meetings, speeches by the Commissioner for Financial Advisers and key staff, and industry media. We also added a new section to our website with up-to-date information on financial adviser regulation and implementing the new regime.

Clearing and settlement

In addition to the actions on NZX and financial adviser regulation, the Commission undertook work on clearing and settlement systems. The Reserve Bank of New Zealand Amendment Act 2009 created a new Part 5C. This provides for the designation of settlement systems and their oversight by making the Commission and the Reserve Bank joint regulators.

Medium-term performance


  • Few recommendations in significant areas need to be made to NZX and it takes action in response to the Commission's recommendations.
  • The Financial Advisers legislation is successfully implemented and the Commission equipped to take on its related role.


  • The last review of NZX, published in December 2009, found its performance as a registered exchange was good and it had taken on board the Commission's recommendations.
  • The Commission remains on track with its preparations for full implementation of the financial adviser regime.

Law reform

The Commission recommends to the Minister of Commerce any securities law improvements that will give New Zealand an internationally acceptable, cost effective regulatory regime that suits our markets.


  • Provide robust advice to Government to give priority to reforms needed to address shortcomings in the law identified through the Commission's work
  • High-quality advice and assistance is given to the Government's financial services policy development


  • Advice given seeks priority for reforms to address identified shortcomings in regulation of financial advisers, disclosure about investment products, issues identified by FSAP, and auditor oversight
  • The quality, quantity and timeliness of advice and assistance to the Ministry of Economic Development's reform programmes satisfy the Commission and the MED

Advice on reforms

Our advice to the Minister and Ministry of Economic Development focused on those matters the Commission believed should be given priority.

This included advising and assisting with Capital Market Development Taskforce recommendations.

The reforms we worked on during the year are outlined below.

Financial Markets Authority

In April, the Minister of Commerce announced the establishment of a consolidated regulatory agency to be known as the Financial Markets Authority (FMA). The FMA will combine the Securities Commission with aspects of the regulatory functions of the Companies Office, the National Enforcement Unit of the MED, and those of the Government Actuary that deal with supervising KiwiSaver and superannuation schemes. The FMA will be responsible for approving NZX's conduct rules, and for oversight of auditors.

Securities Act Review

The Commission has been working with MED for some time on a review of the Securities Act. In June, the MED published a discussion document seeking submissions on proposals for reform. The discussion document focuses on changes in four main areas: defining financial products, offers to exempt investors, disclosure and collective investment schemes.

Financial Service Providers (Pre-Implementation Adjustments) Bill

Introduced in December 2009 and passed on 30 June 2010 as the Financial Advisers Amendment Act 2010, this Bill amends the Financial Advisers Act 2008 and the Financial Service Providers Act 2008. The amendments provide for effective and efficient implementation of the Financial Advisers Act by making changes that include strengthening the Commission's power to monitor and enforce it. The changes aim to ensure the law provides for responsible regulation of the financial services sector and robust consumer protection. They emphasise the protection of unsophisticated investors.

Securities (Moratorium) Regulations 2009

These regulations came into effect in January 2010, in response to Commission concerns that retail investors required better information before voting on a proposal for a moratorium. The regulations require any issuer proposing a moratorium to issue a revised investment statement in a simple question-and-answer format outlining relevant details of the proposal. The regulations also require issuers in moratorium to issue half-yearly reports on the progress of the moratorium.

Securities Trustees and Statutory Supervisors Bill

This Bill, proposing new powers for the Commission to regulate trustees, was introduced to the House in December 2009. The proposed law will require trustees, statutory supervisors and unit trustees to be licensed by the Securities Commission and to report to it on the conduct and financial health of the issuer they oversee. The Bill will address the shortcomings in New Zealand's regulatory regime made apparent in recent years by the failure of some trustees to exercise effective oversight of finance company issuers.

Securities Regulations 2009

As part of the ongoing effort to simplify offer documents for investors and reduce compliance costs for issuers, new regulations came into effect on 1 October 2009.

These outline the simplified disclosure prospectuses that listed issuers may, in prescribed circumstances, use when offering equity securities, debt securities or units in a unit trust. The new regulations greatly simplify financial reporting requirements for prospectuses, thereby reducing compliance costs for capital raising.

Anti-Money Laundering and Countering Financing of Terrorism Act

This Act was passed in October 2009. The law is designed to enhance collaboration between the financial sector and government in combating money laundering and resulting crime.

The Securities Commission is one of three government agencies (along with the Reserve Bank and the Department of Internal Affairs) appointed to work with the Police's Financial Intelligence Unit for supervising and enforcing this law. The Securities Commission's responsibility covers issuers of securities, collective investment schemes, brokers, financial advisers, trustee companies and futures dealers.

The law is still in the implementation stage, with regulations being drafted for implementation by the responsible agencies. The Commission is preparing a sector risk assessment; it has surveyed industry to determine the money laundering and terrorism financing risks across all entities it surveys.

Settlement Systems, Futures and Emissions Units Bill

The Bill passed into law in November 2009. It reforms the law relating to settlement systems under the Reserve Bank of New Zealand Act 1989, changes the application process for an entity seeking to become an authorised futures exchange under the Securities Markets Act 1988, and clarifies the regulatory framework for emissions units under the Securities Act 1978 and Securities Markets Act.

Feedback from MED

The Ministry of Economic Development is satisfied with the Commission's advice.

Medium-term performance


Laws are enacted to address shortcomings identified by the Securities Commission.


The Securities Regulations and Securities Moratorium Regulations were enacted, addressing shortcomings identified by the Commission.

Exemptions and authorisations

Exempting issuers from the law reduces their costs in bringing new and overseas investment products to New Zealand markets.


  • Decisions on exemptions and authorisations are clearly based on the policy of the law while meeting the needs of the market
  • Applications are completed within the agreed time


  • Published a Statement of Reasons as part of each exemption notice, which explains the policy basis for the Commission's decision
  • Dealt with all applications for exemptions and authorisations within the time agreed with the applicants

The Commission published a Statement of Reasons in every exemption notice to provide transparency around the policy basis for the decision.

Seventy-one applications for exemptions and authorisations were dealt with during the year. Of these, 97% were completed within the agreed time as explained in the Statement of Service Performance.

Significant exemptions and authorisations

Share purchase plans

We extended class exemptions for share purchase plans, allowing issuers to raise up to $15,000 per shareholder per year, instead of the previous $5,000 maximum.

Deposit guarantee scheme

We granted a new class exemption for the extended government deposit guarantee scheme.

Exempting overseas issuers from the Financial Reporting Act

We granted named Dutch-incorporated issuers a class exemption from various financial reporting requirements so they could use their overseas GAAP-compliant financial statements. This extended an exemption previously granted to named US and UK-incorporated issuers.

Futures dealers authorisations

We authorised 11 futures dealers on Securities Markets Act-compliant terms and conditions.

Securities transfer systems authorisation

The Commission recommended that Austraclear's securities transfer system be approved under the Securities Transfer Act as an electronic securities transfer system.

Medium-term performance


Five-yearly reviews and consultation on class exemption notices indicate they are relevant and useful to market participants.


The next five-yearly review of class exemptions will be undertaken in 2012.

International cooperation and recognition

The Commission cooperates with overseas regulators, and works to position New Zealand internationally as a well-regulated market.


  • The Commission's high profile and good standing in the International Organisation of Securities Commissions (IOSCO) and its contribution to IOSCO's work are maintained, and opportunities leveraged from these to promote New Zealand as a well-regulated market internationally
  • The Commission participates in and promotes use of international MOUs to facilitate effective cooperation and enforcement
  • The Commission promotes the furthering of the trans- Tasman Single Economic Market agenda and maintains a strong relationship with ASIC
  • The Commission promotes the development of the New Zealand capital markets and facilitates cross-border investments


  • Take part in all relevant IOSCO meetings and working groups
  • Take all opportunities identified with MFAT and NZTE while on IOSCO engagements to promote New Zealand as a well-regulated market in which investors can have confidence
  • Positive assessment of the Commission's work towards IOSCO's strategic goal for the IOSCO MMOU is received from IOSCO
  • Meet regularly with ASIC, and cooperative work is completed to agreed standards and timeframes
  • Promote the development of the New Zealand capital markets

Iosco participation

The Commission contributes significantly to strengthening the international investment environment through its participation in IOSCO, the international standards setter for securities regulation.

IOSCO aims to have the world's securities regulators regulate their markets according to explicit principles and standards. To facilitate the enforcing of securities laws and supervision of markets, it encourages cooperation and information exchange.

The Commission is a member of IOSCO's governing body, the Executive Committee, of which Jane Diplock is Chair. The Commission is also Vice-chair of the Asia Pacific Regional Committee. We participated in meetings of these committees and in IOSCO's Presidents Committee.

Under Jane Diplock's leadership, IOSCO has continued its work to establish the regulatory framework for the post-global financial crisis economic world order. This has concentrated on enhancing transparency and accountability, and promoting integrity in financial markets.

Promoting New Zealand in the international financial community

During the past 12 months, while undertaking IOSCO and Financial Crisis Advisory Group (FCAG) commitments, the Chairman promoted New Zealand as a well-regulated securities market to overseas business audiences at 10 leveraging events.

We work with the Ministry of Foreign Affairs and Trade, and New Zealand Trade and Enterprise to maximise the potential benefits for New Zealand's international economic objectives. This involves creating opportunities for the Chairman to promote New Zealand as an investment destination attractive to potential investors, and forging with regulators from other jurisdictions stronger links that will help New Zealand in its aspiration of becoming an international financial centre.

The Commission's prominent role in these international standard-setting organisations, and Jane Diplock's role as Chair, means New Zealand is gaining influence in the global financial community.

Contribution to iosco's strategic goal for information-sharing

New Zealand is a signatory to IOSCO's Multilateral Memorandum of Understanding (MMOU), a global information-sharing agreement intended to enhance the ability of regulators to deal with cross-border enforcement issues. The MMOU has now been signed by 97% of IOSCO's 119 member jurisdictions. These either meet the requirements for becoming a signatory or have made a commitment to seek the necessary legislative changes that would allow them to do so in the near future.

The Commission contributes to the IOSCO MMOU Screening Group, which assesses applications to join the MMOU. It ensures signatories meet the high standards required for providing effective cross-border assistance. The Commission received positive feedback from IOSCO on this work.

The Commission received 10 requests for information under the IOSCO MMOU and/or bilateral MOUs from six overseas regulators. Nine of these have concluded, and inquiries are continuing on one.

Trans-tasman cooperation

New Zealand enjoys a particularly close working relationship with the Australian Securities and Investments Commission. We regularly communicate to discuss the global and trans-Tasman regulatory environment and enforcement issues of mutual interest, as well as to educate staff of both organisations.

The Trans-Tasman Mutual Recognition of Securities Offerings regime reduces costs and simplifies compliance for issuers making offers of securities. It continues to be used by more issuers on both sides of the Tasman. By 30 June, 13 New Zealand companies had used the regime 15 times, and 91 Australian funds and companies 343 times, since it was established in June 2008.

In October 2009, ASIC published results of an issuer poll conducted on both sides of the Tasman on the effects of the mutual recognition regime. It showed that mutual recognition arrangements save issuers between 55% and 95% in the additional legal and documentation costs of capital-raising in the host country.

Financial crisis advisory group

In addition to the progress achieved against the main output measures, the Commission has undertaken work to present itself as a constructive and cooperative member of the international community of regulators. Of note, it has contributed to the work of the Financial Crisis Advisory Group (FCAG).

FCAG comprises 18 international finance-sector leaders appointed in 2008. They advise the global accounting standard setters - the International Accounting Standards Board and the United States Financial Accounting Standards Board - on the implications of the global financial crisis for global financial reporting standards. Jane Diplock is a member of FCAG.

In July, the group published its report outlining broad principles for improving financial reporting. These would contribute to a more stable global economic order through, most notably, a single set of globally accepted accounting standards. After reviewing implementation of its recommendations, the group sent a follow-up letter to G-20 leaders in January.

Medium-term performance


Cooperation in our enforcement work is forthcoming from other regulators when needed.


100% of our requests for information under the IOSCO MMOU and/or bilateral MOUs were met with good cooperation.

Public understanding

The Commission promotes public understanding of securities law and practice because well-informed investors are an essential ingredient of robust capital markets.


  • Investors and potential investors, intermediaries and market participants understand securities law and securities market practices that are applicable to them
  • The public and news media are aware of the work and views of the Commission
  • Communications maximise regulatory impact


  • Initiatives meet pre-set measures of success to 90%
  • Significant regulatory actions are communicated

Significant initiatives

The Commission undertook three significant communications initiatives which all met pre-set measures of success.

  • A refresher campaign promoting the Commission's website saw a threefold increase in traffic to the website during the campaign.
  • Monthly media monitoring begun in January provided a baseline for evaluating media coverage of the Commission.
  • Research to assess the level of public awareness and understanding about the Commission established a reliable baseline. It found 22% of the population had heard of the Commission and had a reasonably correct perception of what it did.

Significant regulatory actions

We publicised all significant regulatory actions and informed people about securities markets and their regulation using a range of communication tools. These include our websites, media releases, published articles and speeches.

Other communications

In addition to the above achievements, the Commission improved investor understanding of real property proportionate ownership schemes, provided guidance for Hanover investors considering the Allied Farmers offer, and discussed regulatory landscape issues, by way of articles published in the New Zealand Herald and on our website.

Medium-term performance


Our communications initiatives succeed in delivering information to their target audiences.


The Commission expects the FMA to develop medium-term measures for its communications initiatives by 2012/13.